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By Curzio ResearchJune 4, 2024

Massive profits in Big Oil from this under-the-radar trend

An under-the-radar trend is unfolding in the oil sector—one that the mainstream media seems to be ignoring…

Several of the biggest names in energy have been quietly scooping up their smaller competitors.

Today, we’ll explain what the wave of consolidation means for the energy sector… and why investors should have exposure to this critical sector.

First, let’s take a look at what’s driving the recent buying spree…

The oil land grab is on

Over the last year, there have been a string of mergers and acquisitions (M&As) from the “Big Four” energy companies…

First, in August 2023, Chevron (CVX) wrapped its acquisition of PDC Energy for $6 billion. A few months later, in October, it announced plans to acquire Hess in a $53 billion deal.

That same month, ExxonMobil (XOM) announced it would be acquiring Pioneer Natural Resources for about $60 billion (the deal was finalized in May 2024). And in November 2023, XOM completed its acquisition of Denbury Inc. for $5 billion.

In December, Occidental Petroleum (OXY) announced it would buy CrownRock for $12 billion…

And just last month, ConocoPhillips (COP) announced plans to buy Marathon Oil for more than $22 billion.

(It’s worth noting that Curzio Research predicted a land grab in the oil patch way back in April 2023… when Exxon first said it was eyeing Pioneer, before any official deal agreement.)

The reason for the land grab is simple… The post-COVID oil bull market has left oil companies with their strongest balance sheets ever. Put simply, these companies are cash flow generators. For instance, Exxon now holds $33 billion in cash, six times more than four years ago.

Awash in cash, Big Oil has been strategically expanding… by acquiring proven—and highly profitable—assets. 

In fact, the “Big Four”—Exxon, Chevron, Occidental, and ConocoPhillips—now own close to 60% of the future production in the Permian Basin, one of the best oil fields in the world.

Since these assets don’t require exploration, and the infrastructure is already in place for production, the acquisitions are “immediately accretive” (read: profitable).

It also means the companies can start rewarding shareholders right away.

For instance, the Marathon deal is set to save ConocoPhillips $500 million annually right from the start. It also allows the company to raise its dividend by 34% and buy back $20 billion in shares over the next three years.

What’s more, it doesn’t matter where oil prices go from here… You see, advancements in fracking technology have reduced breakeven costs to around $30 per barrel in regions like the Permian Basin. 

Without getting too into the weeds, as long as oil stays above $65 per barrel, Big Oil will continue to print cash. For context, after pulling back, oil is currently trading at about $73 per barrel—about 14% lower than its April levels of $85. But again, the pullback won’t deter oil companies from rewarding shareholders.

(It’s also worth noting that oil will likely surge from current levels… as all the geopolitical tensions, from the Russia-Ukraine war to the conflict in the Middle East, are extremely bullish for energy.)

The bottom line: The recent acquisition spree shows the oil sector is not just surviving but thriving… and no matter where oil prices go from here, Big Oil is about to see profits explode.

Plenty of opportunities to profit from Big Oil’s upside

The land grab in the oil patch isn’t over… As long as there are smaller companies in regions like the Permian Basin, Big Oil will continue using its massive amounts of cash to acquire these names.

So keep an eye on the Permian players… Devon Energy (DVN), Coterra Energy (CTRA), and Diamondback Energy (FANG)—all of which have significant Permian assets—could become acquisition targets in the near term.

But investors don’t need to predict the next multibillion-dollar deal to profit…

As we said, the biggest names in oil will print cash (and reward shareholders) over the long term, no matter where oil prices go from here.

For one of our favorite “no-brainer” energy plays, join us at Curzio Research Advisory.

This holding is one of the best U.S. producers, with assets in every major shale region in the country (including the Permian).

It could easily become an acquisition target of one of the Big Four…

And it’s a buy at current levels.

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